SA Budget 2019/20 – The good and bad news for SMES from Budget 2019

Finance Minister Tito Mboweni on Wednesday referenced the private sector as the key engine for job creation in his national Budget speech.

Fin24 spoke to the experts, who highlighted several key positives and negatives for small and medium enterprises from this year’s Budget.

On the plus side:

1. Falling data costs

Mboweni was adamant that the cost of data must fall, and committed to work with the necessary parties to ensure this occurs, says Ben Bierman, MD of Business Partners.

As data becomes cheaper, there will be more opportunities for SMEs and entrepreneurs to build their businesses and for new technology businesses to emerge. This means affordable, accessible data can help drive economic growth, Bierman believes.

National infrastructure spend will likely be a big contributor to SME growth, creating positive knock-on effects for job creation in the sector. Not only will SMEs be included in the supply stream, but as infrastructure projects are rolled out, economic growth will be positively impacted, having a downstream effect on small business, Bierman says.

4.R3.2bn to operationalise the small business and innovation fund over the medium term

The R3.2bn budget allocation for the small business and innovation fund is a positive development for the country’s entrepreneurial eco-system, anticipated to contribute to the creation of more innovative businesses that can respond to opportunities presented by the 4th Industrial Revolution.

Also noteworthy is the R481.6m allocated to the Small Enterprise Development Agency’s incubation programme, expected to bolster both the creation of new businesses and the survival rate of existing businesses, says Bierman.

5. Industrial business incentives

The R19.8bn allocated to industrial business incentives will yield opportunities for local industrial SMEs, create job opportunities and benefit the economy overall, Bierman told Fin24.

The R600m assigned to the clothing and textile competitiveness programme is also a much-needed boost to revitalise this struggling sector, which was historically a driver of economic growth.

Karl Westvig, CEO of Retail Capital, welcomed the money allocated to the Small Enterprise Development Agency, saying it would help incubate new businesses. “But if we want to develop new jobs in South Africa, government should also be investing heavily in the growth of those SMEs that already have a proven track record,” said Westvig.

“What they lack most is access to funding to support increased stock levels, new locations and new channels to customers. This leads to growing turnover and more staff to handle this growth.”

2. A high tax burden

Steven Nathan, CEO of 10X Investments, said although the economy isn’t growing much, revenues are still growing at a high rate. This means businesses and consumers are being taxed very highly in a low growth environment.

With entrepreneurial activity a leading component of wealth creation, corporate taxes and dividend withholding taxes are important considerations, added Kuhle Kunene, head of wealth advisory at Standard Bank Wealth and Investment.

“Fortunately, there were no direct tax increases with the rate applicable for corporate income for both resident and non-resident companies a flat 28%. The rate of dividends tax increased from 15% to 20% for any dividend paid on or after 22 February 2017, but was not increased this year,” said Kunene.

3. More information, please

Pieter Bensch, executive vice president of Sage Africa & Middle East, says the mentions made of SMEs were short on detail, at a time SA desperately needs to supercharge the segment’s growth. Bensch also emphasised the need to free small businesses from “stifling regulations and complicated taxes” in order to boost employment and drive competition.

He commended the Minister’s acknowledgement of these issues, saying this aligned with the president’s pledge to improve ease of doing business in his State of the Nation Address.